Pakistan emerges strong on investment radar
UAE and other investors also have an eye open to the big market as the upcoming Pakistani production and export base will feed in the overall context of China Pakistan Economic Corridor.
FDI inflows rise as Chinese and UAE investment surge
Foreign direct investment (FDI) private inflows into Pakistan are rising rapidly, as Chinese share goes up and the UAE looks increasingly prominent.
These are some of the lines on which FDI into Pakistan is rising, and going into very productive and high-dividend sectors. This is amply indicated in the FDI inflows analysis undertake by the State Bank of Pakistan (SBP), the central bank, for the just ended fiscal year 2015-16.
Cpec holds the success key
While the Chinese private sector investment in Pakistan is closely related to the $46 billion China Pakistan Economic Corridor (Cpec), and its three-year early harvest programme which commenced in 2015-16, UAE is increasingly coming in to benefit from Pakistan as their key investment and export base to feed the global market. UAE and other investors also have an eye open to the big market as the upcoming Pakistani production and export base will feed in the overall context of Cpec.
The Cpec will link Middle East, Africa and UAE in the south-west, Central Asia and EU in the north, and China in the East of Pakistan - a huge zone lying between Asean and EU. It will be a 21st and 22nd century economic miracle, economists, futurologist and analysts say.
All this is not just a bundle of dreams. Actual implementation and the project construction work is on, in several parts of the Cpec within the Chinese territory, and in Pakistan itself. Look at the ongoing huge construction work at the brand new Gwadar port and its industrial city, only a few kilometres from the booming UAE and across the Straits of Hormuz. This, itself is wisening up the UAE investors to put in their cash into Pakistan's portfolio investment, and other projects.
You will also see big teams of engineers, planner and manpower busy at a number of project-sites from Sust at the China-Pakistan border in the Karakoram range of mountains in the north, to Gwadar in the South-West. These teams are busy in constructing a range of projects from power generation to processing of farm products.
SBP data latest data indicated that the FDI inflows in 2015-16 rose 39 per cent to total $1.281 billion, up from $923 million in 2014-15. The volume should be appreciated in the context of the fact that 2015-16 saw Pakistani Armed Forces defeating the Taliban and other foreign and domestic terrorist groups, bringing peace and insuring safety to the economy. At the same time, Prime Minister Nawaz Sharif's pro-investment and business policies helped generate more electric power and supplied larger quantity of natural gas, including LNG imported from Qatar, to help the industry in boosting the production. It nearly ended the power outages which had hit the industrial output. These factors brought back to Pakistan new investors, with a firmer confidence in the its economy.
On the top of the names of investors is China, under the umbrella of Cpec. The Chinese investment rose to $594 million in 2015-16, more than double as compared to $257 million in same period in previous fiscal year. Norway figured at No 2 with $172 million.
The UAE undertook investment of $164 million followed by Hong Kong and Italy, which provided $131 million and $103.5, respectively. The United States investment, which was $208 million in 2014-15, turned into minus because of its investment outflow of $65 million. The SBP also reports that 2015-16 saw a net outflow of portfolio investment of $319.7 million.
The foreign investors were keen on highly productive investment into power sector which attracted $566.6 million, up from $219 million in 2014-15. All indications are that for the next few years power sector will be the most attractive sector for FDI investment as demand rises rapidly. A large number of Chinese investors have gone into power generation in the last two years.
Investment in oil exploration was somewhat down to $261 million compared to $ 299 million in 2014-15. It was yet another sector, which recorded a continued disinvestment. It was $14.7 million while its disinvestment in 2014-15 was $20 million.
A very significant decline was seen in the high-dividend banking and financial sector which was down to just $28 million, compared to an inflow of a good $256 million in 2014-15.
The investment outflow of $102 million to Saudi Arabia was the highest in 2015-16.
Welcome UAE investment
Finance Minister Ishaq Dar said recently that Pakistan's overall domestic and foreign investment ratio to GDP has increased from 12.6 per cent to 15.6 per cent, which will further increase to 21 per cent.
While talking to a delegation of the Abu Dhabi Group, led by its Chairman Shaikh Nahyan bin Mubarak Al Nahyan, in Islamabad, the minister said the government welcomes foreign investment, which will help achieve the objective of higher sustainable economic growth.
Dar also welcomed the merger of Pakistan Mobile Communications Limited and Warid Telecom. The merger is a proof of the strength gained by Pakistan's economy and the business opportunities it offers for business investors.
Shaikh Nahyan said Pakistan has become an attractive investment destination due to the turnaround in its economy, and "we expect more UAE investments coming to it in the near future".
Pakistan and international foreign investors from UAE, Saudi Arabia, Malaysia, Singapore, China, EU, UK and US are now evaluating various projects for investment in the country. Besides this, major foreign trade groups are negotiating business deals with their Pakistani counterparts.
In Bahrain, for instance, "First Pakistan-Bahrain Business Opportunities Conference" will take place on September 27 to focus on investment opportunities in agriculture, banking, aviation services, jewellery, chemicals, footwear, furniture and textiles.
The writer is based in Islamabad. Views expressed are his own and do not reflect the newspaper's policy.